The first in a series of meetings to decide the fate of the Government's White Paper on the reform of white collar compulsory competitive tendering (CCT) was due to take place last week.
Officers from the Association of Metropolitan Authorities council associations were due to meet on Friday with the department of the environment.
The AMA has threatened legal action against the Government unless it revises some of the proposals to farm out more work to private firms.
The associations say it is too early to judge how CCT is working, and that the proposed 12 months is an inadequate timescale for the implementation of the proposed changes.
Credits and allowances are a central issue. The AMA is concerned about the Government's proposed restrictions on what work is allowed to be counted towards each department's CCT allocation.
The associations originally took counsel's advice on whether the first consultation period of six weeks, which followed the White Paper published in May, was too short, but have decided to drop any possibility of action.
A spokeswoman for the AMA said: "The CCT regime has just slotted into place and now the Government wants to change the whole thing. Although our next move depends on the Government's final
decision, we are convinced that it would be worth our while to mount a legal challenge against the proposed timescales."
Both the Association of Council Secretaries and Solicitors and the Law Society's local government group are supporting the AMA.
The Government's final reform proposals are due to be
issued at the end of September and followed by a second consultation period of about six weeks.